IRS Issues "Deemed IRA" Guidance

January 3, 2003 ( - Plan sponsors who want to add a "deemed IRA" to their pension plans under an EGTRRA provision now have official guidance on how to do that.

Revenue Procedure 2003-13 shows how plans can institute amendments to set up a separate account or annuity under the plan that is treated like an IRA under certain conditions, Washington-based legal publisher BNA reported.

The “deemed IRAs” are provided for under tax code Section 408(q), created by EGTRRA, for plan years beginning in 2003. IRS officials said they plan to issue regulations governing that section soon.  “Deemed IRAs” must meet the applicable requirements of Sections 408 and 408A for IRAs and Roth IRAs, federal officials said.

Except during 2003, IRS said sponsors must provide for the “deemed IRAs” in plan documents before accepting them from participants.

Sponsors must otherwise comply with Notice 2001-57, which provides sample “good faith” amendments that can be used to satisfy EGTRRA, through a remedial amendment period ending no earlier than the end of the first plan year beginning on or after January 1, 2005.

Revenue Procedure 2003-13 provides a sample amendment that IRS said is a reasonable good faith amendment if the plan also includes language that satisfies either Section 408 or 408A. Such language must satisfy every applicable point in the IRA List of Required Modifications, a sample of which is provided on IRS’s World Wide Web site.

Revenue Procedure 2003-13 will be published in Internal Revenue Bulletin 2003-4 dated January 27, 2003.